Minnesota Cracks Down On Sales Of Securities By Unlicensed Agents

Most of these instruments fall within the definition of a security and are governed by the securities laws and regulations pertaining to the sale and/or marketing of securities products, the department says. The department intends to pursue administrative sanctions against the license of any insurance agent who participates in the illegal offer or sale of these unregistered, non-exempt products or who engages in the sale of registered or exempt securities without first becoming licensed as a securities agent.

While many promoters claim that these investments are exempt from registration or that the product is “not a security” they clearly meet the definition of a “security,” the department says.

The companies soliciting unsuspecting insurance agents frequently fail to advise them of their need for a securities agent’s license or that they will be subject to the fraud provisions of the securities laws, the department says. Further, the promoters of these products often require that all parties must keep the transactions strictly confidential and may require agents and investors to sign nondisclosure agreements.